Pickard, V. (2014). The Great Evasion: Confronting Market Failure Pickard – The Great Evasion Your Name: Section: Media as Public Goods Close your books/notes: Connect the new information in this section with what you knew before you read this section. 1. Describe the information that is new for you in this section 2. How do the new ideas work with what you already know? 3. Explain how your prior knowledge and these Use specific and concrete examples new ideas work together. Provide an Be sure to make a link between the example. idea and the example. 4. Write two “I wonder (if, whether, why, how, which, where, who, etc.) . . .” questions that you have as a result of reading this section. Section: Evading Market Failure Close your books/notes: Connect the new information in this section with what you knew before you read this section. 1. Describe the information that is new for you in this section 2. How do the new ideas work with what you already know? 3. Explain how your prior knowledge and these Use specific and concrete examples new ideas work together. Provide an Be sure to make a link between the example. idea and the example. 4. List two “I wonder (if, whether, why, how, which, where, who, etc.) . . .” questions that you have as a result of reading this section. Section: Structural Interventions and Alternative Infrastructures Close your books/notes: Connect the new information in this section with what you knew before you read this section. 1. Describe the information that is new for you in this section 2. How do the new ideas work with what you already know? Pickard, V. (2014). The Great Evasion: Confronting Market Failure 3. Explain how your prior knowledge and these Use specific and concrete examples new ideas work together. Provide an Be sure to make a link between the example. idea and the example. 4. Write two “I wonder (if, whether, why, how, which, where, who, etc.) . . .” questions that you have as a result of reading this section. This art icle was downloaded by: [ Universit y of Pennsylvania] On: 03 June 2014, At : 06: 26 Publisher: Rout ledge I nform a Lt d Regist ered in England and Wales Regist ered Num ber: 1072954 Regist ered office: Mort im er House, 37- 41 Mort im er St reet , London W1T 3JH, UK Critical Studies in Media Communication Publicat ion det ails, including inst ruct ions for aut hors and subscript ion informat ion: ht t p:/ / www.t andfonline.com/ loi/ rcsm20 The Great Evasion: Confronting Market Failure in American Media Policy Vict or Pickard Published online: 02 Jun 2014. To cite this article: Vict or Pickard (2014): The Great Evasion: Confront ing Market Failure in American Media Policy, Crit ical St udies in Media Communicat ion, DOI: 10.1080/ 15295036.2014.919404 To link to this article: ht t p:/ / dx.doi.org/ 10.1080/ 15295036.2014.919404 PLEASE SCROLL DOWN FOR ARTI CLE Taylor & Francis m akes every effort t o ensure t he accuracy of all t he inform at ion ( t he “ Cont ent ” ) cont ained in t he publicat ions on our plat form . However, Taylor & Francis, our agent s, and our licensors m ake no represent at ions or warrant ies what soever as t o t he accuracy, com plet eness, or suit abilit y for any purpose of t he Cont ent . Any opinions and views expressed in t his publicat ion are t he opinions and views of t he aut hors, and are not t he views of or endorsed by Taylor & Francis. The accuracy of t he Cont ent should not be relied upon and should be independent ly verified wit h prim ary sources of inform at ion. Taylor and Francis shall not be liable for any losses, act ions, claim s, proceedings, dem ands, cost s, expenses, dam ages, and ot her liabilit ies what soever or howsoever caused arising direct ly or indirect ly in connect ion wit h, in relat ion t o or arising out of t he use of t he Cont ent . This art icle m ay be used for research, t eaching, and privat e st udy purposes. Any subst ant ial or syst em at ic reproduct ion, redist ribut ion, reselling, loan, sub- licensing, syst em at ic supply, or dist ribut ion in any form t o anyone is expressly forbidden. Term s & Condit ions of access and use can be found at ht t p: / / www.t andfonline.com / page/ t erm sand- condit ions Critical Studies in Media Communication 2014, pp. 1–7 The Great Evasion: Confronting Market Failure in American Media Policy Downloaded by [University of Pennsylvania] at 06:26 03 June 2014 Victor Pickard The history of American media is in many ways a history of market failure. Yet these recurring patterns almost always go unrecognized in mainstream policy discourse. Because media are special kinds of goods and services, the market’s failure to provide them is particularly deleterious for democratic governance. The “public good” qualities and other characteristics intrinsic to media result in a kind of systemic market failure that cannot be entirely eliminated. However, this market failure can be reduced or compensated for via public policy that recognizes the tremendous positive externalities associated with a healthy media system. Keywords: Media Policy; Media Reform; Journalism; Political Economy; Internet Studies A historical view of American media lays bare discernible patterns: over-commercialization, concentrated ownership, lack of diversity, poor access, and weak public service traditions. With alarming regularity, many of these deficiencies recur with each new commercial medium, from the telegraph to the internet. These trends are often bound up in a phenomenon known as “market failure,” which generally refers to the market’s inability to efficiently allocate important goods and services (Taylor, 2007, p. 15). The history of American media is in many ways a history of market failure (Pickard, in press), yet these recurring patterns almost always go unrecognized in mainstream policy discourse. Because media are special kinds of goods and services, the market’s failure to provide them is particularly deleterious for democratic governance. As I elaborate below, the “public good” qualities and other characteristics intrinsic to media result in a kind of systemic market failure that cannot be entirely eliminated. However, Victor Pickard is an Assistant Professor of Communication. The author would like to thank Doug Allen and Chris Cimaglio for their excellent research assistance. Correspondence to: Victor Pickard, Annenberg School for Communication, University of Pennsylvania, 3620 Walnut Street, Philadelphia, PA 19104, USA. Email: vpickard@asc.upenn.edu ISSN 1529-5036 (print)/ISSN 1479-5809 (online) © 2014 National Communication Association http://dx.doi.org/10.1080/15295036.2014.919404 Downloaded by [University of Pennsylvania] at 06:26 03 June 2014 2 Victor Pickard this market failure can be reduced or compensated for via public policy that recognizes the tremendous positive externalities associated with a healthy media system. According to textbook scenarios, cases of market failure should necessitate public policy intervention. This necessity, however, is usually obscured by what I refer to as “corporate libertarianism”—an ideological project that equates corporations’ freedoms generally, and media firms’ privileges specifically, with individual liberties like First Amendment protections. Such an arrangement renders state interventions on behalf of public interest protections as a priori illegitimate. Therefore, we cannot dare talk about market failure because to do so may suggest that the government should intervene. The following essay posits that market failure should become a central concern within policy discourse. Such a refocusing, I argue, would help justify targeted government interventions, thereby realigning media policy with democratic values like equal access to diverse information and media production. Media as Public Goods The argument that the information produced by news media should be treated as a public good has gained greater visibility in recent years, especially as the journalism crisis has worsened (Baker, 2002, p. 8; Hamilton, 2006, pp. 8–9; Pickard, Stearns, & Aaron, 2009, pp. 1–9; McChesney & Nichols, 2010, pp. 101–103; Pickard, 2011, p. 89). Because public goods are non-rivalrous (one person’s consumption does not detract from another’s) and non-excludable (difficult to monetize and to exclude from free riders), they differ from other commodities, like cars or clothes, within a capitalistic economy (Samuelson, 1954). As one economist put it, “it is virtually impossible to allocate a pure public good through market mechanisms” (Trogen, 2005, p. 169). Many public goods—like artificial light, clean air, knowledge—also produce positive externalities (benefits that accrue to parties outside of the direct economic transaction) that are essential for a healthy society. In this sense, the information produced by journalistic practices is a public good that carries tremendous positive externalities because it confers social benefits beyond its revenue stream. As an essential public service, news media ideally serve as an adversarial watchdog over the powerful, a forum for diverse voices and viewpoints, and a rich information source for important social issues upon which citizens will vote. Like many public goods exhibiting positive externalities, journalism has never been fully supported by direct market transactions; it always has been subsidized to some degree. Since the late 19th century, journalism has been primarily supported by advertising revenues. But this model is increasingly unsustainable as audiences and advertisers migrate to the internet, where ads sell for a mere fraction of their paperbased counterparts. Although increasing, digital ad revenues are not offsetting enormous losses from traditional advertising. A 2012 Pew study found that declines in print ad revenue, which had fallen more than 50 percent since 2003, far exceeded any gain in online digital revenue, with the ratio of losses to gains greater than 10 to 1 (Edmonds, Guskin, Rosenstiel, & Mitchell, 2012). Despite some stabilization by 2013, Pew found that the growth in digital advertising still “does not come close to covering Downloaded by [University of Pennsylvania] at 06:26 03 June 2014 Confronting Market Failure in American Media Policy 3 print ad losses” (Edmonds, Guskin, Mitchell, & Jurkowitz, 2013). Based on these and other data, ad-revenue-dependent models for supporting viable journalism appear to be increasingly unviable, with no other commercial models—like online subscriptions (Pickard & Williams, 2013)—filling the vacuum. The ongoing disinvestment in news production is demonstrated by drastic actions like cutting staff and reducing home deliveries of leading metro dailies such as the Cleveland Plain Dealer and the New Orleans Times-Picayune—the latter in a city where approximately a third of its residents lack internet connectivity. Lack of quality internet access brings us to another breakdown in public good provision. Nearly a third of all U.S. households still lack broadband internet, at least partly owing to prohibitive cost (Pew Research Center, 2013). Even for those with access, services are subpar and costly in a global comparison. American broadband is the 7th most expensive, and 19th in terms of speed among leading democracies. In terms of internet penetration, the U.S. ranks 15th internationally, having dropped sharply over the past decade (Organization for Economic Cooperation and Development, 2012). In terms of cost, the U.S. ranked 30th out of 33 countries, with an average price of $90/month for higher speeds of 45 Mbps and over (Geoghegan, 2013). The average American broadband customer currently pays over $40/month for 27 Mbps, while an average South Korean pays a fraction of that price for 70 Mbps (Organization for Economic Cooperation and Development, 2011). A more recent report exposes the degree to which American cities lag behind their counterparts around the world in broadband speeds and prices. For example, the same broadband speed that fetches $21.75 in Riga, Latvia, costs $112.50 in Washington, D.C. (Hussain, Kehl, Lucey, & Russo, 2013). These inequities are neither happenstance nor inevitable; they result from explicit policies that accommodate oligopolistic markets and corporate interests in general (McChesney, 2013; Crawford, 2013). Such are the predictable outcomes of a political process captured by commercial power. And this regulatory capture leads to a kind of discursive capture reflected in a corporate libertarian paradigm that masks market failures and discredits government intervention. Evading Market Failure The inadequacy of commercial support for democracy-sustaining infrastructures suggests what should be obvious by now: the systematic underproduction of vital communications like journalistic media and accessible, affordable, and reliable broadband internet services qualifies as a clear case of market failure. Although this analytical framework derives from neoclassical economic theory—where it is often treated as a rare event—market failure has also been a concern among critical political economists who focus on media’s normative foundations and who observe a number of market failures affecting media specifically. For example, commercial media markets tend toward concentration and produce both negative and positive externalities that must be managed via government regulation (Freedman, 2008, pp. 8–9). Positive externalities especially come into play with the consumption of “merit goods,” which are goods that Downloaded by [University of Pennsylvania] at 06:26 03 June 2014 4 Victor Pickard society requires, but that individuals typically undervalue (are unable or unwilling to pay for), and thus the market under-produces (Musgrave, 1959, pp. 13–15; Leys, 2001, pp. 97–98; Ali, 2013). Such market failures typically occur when private enterprise withholds investments in critical social services because it cannot extract the returns that would justify expenditures, or when consumers fail to pay for such services’ full societal benefit. The leading consumer advocate and researcher Mark Cooper (2011) demonstrates that various kinds of “pervasive market failure” specifically affect the media industry. In addition to the lack of support for public goods, positive externalities constitute a separate market failure whereby consumers do not support services that are socially beneficial. Another kind of market failure that frequently occurs in the American media system is associated with structural flaws like oligopolistic concentration and profit maximization. Uncompetitive markets can lead to perverse incentives and the abuse of market power, which results in a media system’s overall degradation. In addition to noting the problems with monopolies, public goods, and externalities, Cooper makes the important point that commercial media markets typically fail to ensure interconnection between networks and to provide communication services to all of society, which can lead to red-lining (privileging profitable markets and communities over others). Other kinds of market failure involving media include information asymmetries, and problems with economies of scale and scope like high first-copy costs (Baker, 2002, p. 9). While market failure in the American media system is increasingly visible, the vocabulary for describing such structural problems remains impoverished. Similar situations requiring state intervention to ensure essential services and infrastructures not sufficiently provided by the market include public education, a standing military, and a national highway system. That the government provides for these services is largely naturalized and rarely requires justification. Yet it generally remains counterintuitive that the same rationale can be used to justify enacting public policy to address failures in media markets. Although its relationship to market failure is rarely stated, the foundation of a public broadcasting system is an example of this logic put into practice. Similarly, having a category for “public interest” policies implicitly acknowledges endemic market failure in commercial media. Nonetheless, an explicit discussion of these political economic relationships has remained virtually nonexistent among policymakers. Whether appraising the lack of support for local journalism or deficiencies in providing universal access to affordable and reliable internet service, a focus on market failure deserves more prominence in American media policy discourse. Structural Interventions and Alternative Infrastructures Once market failure is acknowledged at the discursive level, it can be treated as a social problem that warrants public policy intervention. However, whereas a neoclassical economist might argue for simply fostering more competition to create the desired outcomes, what I refer to as “systemic media market failure” calls for Downloaded by [University of Pennsylvania] at 06:26 03 June 2014 Confronting Market Failure in American Media Policy 5 additional policy interventions to ensure that a media system’s positive externalities are supported and enhanced. Potential remedies include anti-monopoly structural interventions like antitrust measures to increase competition as well as significant investments in alternative, non-profit, and noncommercial communication infrastructures to promote structural diversity. This muscular policy approach is called for because oligopolistic media firms otherwise have little incentive to make the necessary investments to address structural problems like insufficient capacity. A first step toward a partial remedy is to subsidize the build-out of alternative communication networks to compete with incumbent internet service providers. Susan Crawford (2013) makes a compelling argument that digital media industries wield such influence over the political process that structural intervention like trustbusting is virtually impossible for the immediate future. However, she sees hope in a smattering of community owned internet networks that provide cheap and reliable broadband services to their residents, thereby challenging the dominance of providers such as Verizon and Comcast—at least in the 31 states that have not yet passed laws making it extremely difficult or impossible for municipalities to offer community broadband. Locally owned and controlled wireless or municipal fiber internet networks could be operated through community media centers. These centers could be housed in post offices or public libraries and supported by local and national tax revenues. This community media infrastructure could also help produce journalistic media by combining resources with public radio stations, public access television, low power FM radio, and other local institutions. While addressing market failure within the digital realm would greatly benefit news media, policy reforms aimed specifically at lessening market pressures on journalistic institutions could help liberate them to become more focused on adversarial reporting and more accountable to diverse communities. A three-pronged approach to reinventing journalism would involve subsidies for an expanded public media system, tax incentives for struggling media institutions to transition into low- and non-profit status, and government-sponsored research and development efforts for new digital models that may include public/private hybrids. Together, these initiatives would remove or reduce market pressures and help restore journalism’s public service mission (Pickard, in press). Before any of these reforms can occur, American policy discourse must first be reframed to acknowledge systemic media market failure. The ongoing evasion of this structural critique will likely perpetuate worsening communication inequalities in the U.S. Transitioning to a new digital media system requires a paradigm shift away from corporate libertarianism toward a framework that recognizes media’s public good qualities and positive externalities, and embraces government’s affirmative role in providing for society’s communication needs. A long-standing “American exceptionalism” in media policy discourse assumes almost no legitimate role—aside from servicing business interests—for government intervention in media markets. Until American media’s deficiencies are confronted as market failure, policymakers and reformers will be forced to contend with the pathology’s symptoms instead of its root problems. 6 Victor Pickard Downloaded by [University of Pennsylvania] at 06:26 03 June 2014 References Ali, C. (2013). Where is here? An analysis of localism in media policy in three western democracies (Unpublished Ph.D. dissertation, University of Pennsylvania, U.S.). Baker, C.E. (2002). Media, markets and democracy. New York, NY: Cambridge University Press. Cooper, M. (2011). The future of journalism: Addressing pervasive market failure with public policy. In R. McChesney & V. Pickard (Eds.), Will the last reporter please turn out the lights (pp. 320–339). New York, NY: New Press. Crawford, S. (2013). Captive audience: The telecom industry and monopoly power in the new gilded age. New Haven, CT: Yale University Press. Edmonds, R., Guskin, E., Rosenstiel, T., & Mitchell, A. (2012). Newspapers: By the numbers. The Pew Research Center’s project for excellence in journalism: The state of the news media 2012. Retrieved from http://stateofthemedia.org Edmonds, R., Guskin, E., Mitchell, A., & Jurkowitz, M. (2013). The Pew Research Center’s project for excellence in journalism: The state of the news media 2013. Retrieved from http:// stateofthemedia.org/2013/newspapers-stabilizing-but-still-threatened/ Freedman, D. (2008). The politics of media policy. Cambridge: Polity Press. Geoghegan, T. (2013, October 27). Why is broadband more expensive in the US? BBC News Magazine. Retrieved from http://www.bbc.co.uk/news/magazine-24528383 Hamilton, J. (2006). All the news that’s fit to sell. Princeton, NJ: Princeton University Press. Hussain, H., Kehl, D., Lucey, P., & Russo, N. (2013). The cost of connectivity 2013 data release: A comparison of high-speed internet prices in 24 cities around the world. New America Foundation. Retrieved from http://oti.newamerica.net/publications/policy/the_cost_of_conn ectivity_2013 Leys, C. (2001). Market-driven politics. London: Verso. McChesney, R. (2013). Digital disconnect: How capitalism is turning the internet against democracy. New York, NY: New Press. McChesney, R., & Nichols, J. (2010). The death and life of American journalism: The media revolution that will begin the world again. New York, NY: Nation Books. Musgrave, R. (1959). The theory of public finance: A study in public economy. New York, NY: McGraw-Hill. Organization for Economic Cooperation and Development. (2011). Average advertised download speeds, by country. Retrieved from http://www.oecd.org/sti/broadband/BB-Portal_5a_13July_Final.xls Organization for Economic Cooperation and Development. (2012). Fixed and wireless broadband subscriptions per 100 inhabitants. Retrieved from http://www.oecd.org/sti/broadband/ 1d-OECD-WiredWirelessBB-2012-12_v2.xls Pew Research Center. (2013). Home broadband 2013. Retrieved from http://pewinternet.org/ Reports/2013/Broadband.aspx Pickard, V. (2011). Can government support the press? Historicizing and internationalizing a policy approach to the journalism crisis. The Communication Review, 14(2), 73–95. Pickard, V. (2013). Social democracy or corporate libertarianism? Conflicting media policy narratives in the wake of market failure. Communication Theory, 23, 336–355. Pickard, V. (in press). America’s battle for media democracy: The triumph of corporate libertarianism and the future of media reform. New York, NY: Cambridge University Press. Pickard, V., & Williams, A. (2013). Salvation or folly? The promises and perils of digital paywalls. Digital Journalism, 2, 195–213. Pickard, V., Stearns, J., & Aaron, C. (2009). Saving the news: Toward a national journalism strategy. Washington, DC: Free Press. Confronting Market Failure in American Media Policy 7 Downloaded by [University of Pennsylvania] at 06:26 03 June 2014 Samuelson, P. (1954). The pure theory of public expenditure. Review of Economics and Statistics, 36, 387–389. Taylor, J. (2007). Economics (5th ed.). New York, NY: Houghton Mifflin. Trogen, P. (2005). Public goods. In D. Robbins (Ed.), Handbook of public sector economics (pp. 169–207). New York, NY: Taylor & Francis.
Purchase answer to see full attachment